01-3804. Self-Regulatory Organizations; Order Granting Accelerated Approval of Proposed Rule Change by the National Association of Securities Dealers, Inc., Relating to EWN II Fees for NASD Members

February 8, 2001.

Introduction

On December 21, 2000, the National Association of Securities Dealers, Inc. (“NASD”), through its subsidiary, The Nasdaq Stock Market, Inc. (“Nasdaq”), submitted to the Securities and Exchange Commission (“Commission”), pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) ^[1] and Rule 19b-4 thereunder,^[2] a proposed rule change relating to Enterprise Wide Network II (“EWN II”) Fees for NASD Members.

The proposed rule change was published for comment in the Federal Register on January 16, 2001.^[3] No comments were received on the proposal. This order approves the proposal.

II. Description of the Proposal

In its proposed rule change, Nasdaq proposed to pass on costs associated with increased bandwidth demands of the EWN II to NASD members for the period December 1-12, 2000.^[4] In the September/October 200 issue of Nasdaq's Subscriber Bulletin,^[5] Nasdaq announced that it had increased the bandwidth of its Enterprise Wide Network II from 128 kilobits (“kb”) to 192 kb. This increased bandwidth provides Nasdaq with the ability to support increased share volume and new products and trading applications that will be introduced. A description of the history of EWN II and the recent bandwith increase may be found in SR-NASD-00-73.^[6] The Subscriber Bulletin also announced that the increased cost of the expanded bandwidth ($375 per month per circuit) would be passed on to Nasdaq subscribers beginning December 1, 2000. Nasdaq absorbed all of increased costs for the month of November 2000.

Because the original filing relating to NASD members was made under section 19(b)(3)(A)(ii), which makes the rule change immediately effective upon filing with the Commission, the fee increase became effective as of December 13, 2000. In this filing, Nasdaq seeks to recover the costs associated with the expanded bandwidth for the period of December 1-12, 2000, as announced in the Subscriber Bulletin.

III. Commission's Findings and Order Granting Accelerated Approval of Proposed Rule Change

The Commission has reviewed the Nasdaq's proposed rule change and finds, for he reasons set forth below, that the proposal is consistent with the requirements of section 15A of the Act ^[7] and the rules and regulations thereunder applicable to a national securities exchange. Specifically, the Commission believes the proposal is consistent with sections 15A(b)(5) of the Act.^[8] Section 15A(b)(5) requires that the rules of a registered securities association provide for the equitable allocation of reasonable dues, fees and other charges among members and issuers and other persons using any facility or system which the association operates or controls. The fee increases proposed by Nasdaq would pass on the costs associated with increasing the capacity of EWN II to users of the Nasdaq Workstation II service.

The Commission believes that Nasdaq's proposal to increase NASD members' fees relating to the EWN II for the period December 1-12, 2000 is a fair means of recovering the costs associated with increasing the bandwidth of the EWN II. The Commission finds that the proposal is consistent with section 15A(b)(5) ^[9] insofar as the new fees reflect the additional cost that Nasdaq is incurring as a result of the expanded bandwidth. The Commission believes that such fee increases, necessitated by recent system volume increases, are a reasonable means by which Nasdaq intends to ensure adequate capacity of its EWN II system and thus, protect the ongoing integrity of the Nasdaq market.^[10]

Nasdaq has requested that the Commission approve this proposed rule change on an accelerated basis.^[11] The original EWN II fee increases for members were effective upon filing with the Commission on December 13, 2000, and have been subject to a full notice and comment period,^[12] and that this current proposal imposing the same fees for the period of December 1-12, 2000, has been subject to a full notice and comment period.^[13] No comments were received on either filing. Thus, the proposed rule change concerns issues that previously have been the subject to a full comment period pursuant to section 19(b) of the Act.^[14] For these reasons, the Commission believes accelerated approval of the proposal is appropriate. Accordingly, the Commission finds good cause for approving the proposed rule change (SR-NASD-00-79) prior to the thirtieth day after the date of publication of notice thereof in the Federal Register.

IV. Conclusion

It is therefore Ordered, pursuant to section 19(b)(2) of the Act,^[15] that the proposed rule change (SR-NASD-00-79) is approved.

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.^[16]

Margaret H. McFarland,

Deputy Secretary.

Footnotes

1.  15 U.S.C. 78s(b)(1).

2.  17 CFR 240.19b-4.

3.  Securities Exchange Act Release No. 43814 (January 8, 2001), 66 FR 3630.)

4.  Nasdaq previously filed under section 19(b)(3)(A)(ii) a proposed rule change to increase the fees beginning December 13, 2000, which was immediately effective upon filing. Securities Exchange Act Release No. 43769 (December 22, 2000) (SR-NASD-00-73), 66 FR 826 (January 4, 2001). Nasdaq also filed a parallel rule filing to effect amendments to the EWN II fee structure to apply to non-NASD members. Securities Exchange Act Release No. 43768 (December 22, 2000) (SR-NASD-00-74), 66 FR 824 (January 4, 2001).

5.  Subscriber Bulletins are mailed to Nasdaq Workstation II subscribers and also may be found at www.nasdaqtrader.com/​trader/​news/​subscriberbulletins.

6.  Securities Exchange Act Release No. 43769 (December 22, 2000) (SR-NASD-00-73), 66 FR 826 (January 4, 2001).

7.  15 U.S.C. 78o-3.

8.  15 U.S.C. 78o-3(b)(5).

9.  Id.

10.  In approving this rule, the Commission notes that it has also considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f).

11.  Telephone conversation between Mary Dunbar, Vice President, Nasdaq, and Geoffrey Pemble, Attorney, Division of Market Regulation, Commission, on February 7, 2001.

12.  Securities Exchange Act Release No. 43769 (December 22, 2000) (SR-NASD-00-73), 66 FR 826 (January 4, 2001).

13.  Securities Exchange Act Release No. 43814 (January 8, 2001) (SR-NASAD-00-79), 66 FR 3630 (January 16, 2001).

14.  15 U.S.C. 78s(b).

15.  15 U.S.C. 78s(b)(2).

16.  17 CFR 200.30-3(a)(12).